The national security is paramount. Economic growth and investments are secondary. With mind numbing planning of the global terrorists India cannot afford to take any and every foreign investment. But that same time it should not create panic for the investors. Any security measure taken in the true sense should be implemented. There will be some noises for some quarters. That's natural and it should be ignored in the long term interests of the nation.
The Times of India writes (20 August 2009)
The NSC has reportedly called for a comprehensive legislation that would enable government to suspend or stop foreign acquisition or takeovers of
Indian firms on grounds of national interest. It has also asked for stringent screening of overseas players from "countries and origins of concern" in sensitive sectors and sites. The finance ministry would oversee implementation of security guidelines.
As in India, governments across the world are understandably thinking hard about security issues, particularly post-9/11. But 'national interest' - which can be nebulously or arbitrarily defined - can't be made an alibi for economic illogic.
The NSC basically advocates FDI protectionism, not the right signal to send the world at a time India wants to be seen as an investment-friendly destination. We already have a rather elaborate FDI-filtering system, ruling out even accidental alerts in sensitive sectors.
The automatic route covers segments without sector caps or where FDI is within caps. Then there's the Foreign Investment Promotion Board (FIPB) which okays investment, and acts as a screening agency for sensitive/negative list sectors. Foreigners, the government itself says, take the FIPB route to play safe in areas not covered by a clearly enunciated policy.
Apart from slowing FDI inflow, an umbrella law could be open to discretionary interpretation and abuse. It would legitimise government interference in business. It could be exploited by corporates with high stakes in takeover battles, to discredit rivals.
Besides, can 'countries of concern' be subjected to profiling in a set of black and white rules without causing diplomatic and cultural misunderstanding? In 2006, a congressional fracas broke out in the US over the Dubai Port World's buyout of a firm stevedoring at some US ports.
Even in post-9/11 America, the issue was debated, not settled according to pre-set bias. If India approves a law, it can hardly argue against rich nations using 'national interest' as a pretext to block investment from fast-emerging economies. Let's deal with FDI-related security concerns - many doubtless valid - on a case-by-case basis. Let's keep a watchful eye on funny money. But let's not resort to economic nationalism which, we all know, cuts both ways.
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t is a truth universally acknowledged that one of the best and most effective methods of fighting and stamping out terrorism is to cut off its
funding at source. So, the National Security Council's (NSC) proposal that a new law be enacted to allow the government to better monitor the flow of money from organisations that support terrorism into the country comes as no surprise. It is imperative for the sake of our national security that the proposals enumerated in NSC's recommendation to the government are adopted as a matter of urgency.
Critics have derided the proposed umbrella legislation as amounting to nothing more than a form of protectionism that will cut off FDI flow to India. But the new law, if enacted, would be aimed at funds coming from countries of concern, like North Korea, Afghanistan and China. In effect, the NSC proposes to subject foreign participation in sensitive sectors and locations in India, coming from such countries, to an added layer of security both when approving the deal and during the period of operation. Other countries like the US and UK have enacted similar laws to better protect their security interests.
A lot of dirty money is laundered via tax havens like Mauritius and the Cayman Islands and their source is not easily verifiable. International criminal syndicates, as well as criminal organisations in other countries, also use countries with lax disclosure norms to filter dirty money. Investments of such nature not only derive from illegal sources, they could be unstable and can be used as tools to destabilise the economic security of the country. So, it makes sense to monitor funds arising from such countries closely. More direct terrorist activity is also funded by organisations based outside the country, and those trails are even more difficult to follow, which makes this law that much more important. It must be remembered that the idea is not to impede FDI inflow but to create a transparent FDI structure. Increased supervision will only strengthen the confidence of genuine foreign investors while discouraging investment from hostile entities.
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